But all is not lost. When it comes to retirement, you must start where you are.

The Cold, Hard Facts

A survey conducted last year by Bankrate found that roughly one-third of Americans ages 30 to 49 hadn’t even started to save for retirement.

That really isn’t surprising. When I gave investment advice professionally, I found that the concept of paying yourself over the long term through saving and investing was tough for many people to grasp, even though it’s a simple concept.

For example, if you invest $200 a week for 20 years and get an 8% annual return, you’ll have about $500,000 at the end of the 20 years.

But in our instant gratification society, many clients wanted to pay themselves immediately with a trip to Disney World instead.

The endpoint of such short-term thinking is not a pleasant place. It’s a place where you work until you drop and hope Social Security is still solvent.

The truth is thus: If you want to live the lifestyle that you’ve become accustomed to, you’ll need to replace 75% to 85% of your pre-retirement income with retirement income, including Social Security.

That means you’ll need to have saved, at minimum, eight times your ending salary before retiring. A nest egg like that requires some hard choices and careful financial planning.

Playing Catch-Up

Here are some suggestions based on my years of experience of working with retail clients who started to plan for retirement in their middle years.

First, alleviate that “sandwiched” feeling:

To help with the financial care of a parent, look seriously into long-term care insurance.

Also, tell your children to finance a good chunk of their college education through scholarships, grants, loans, and work-study programs.

That last one may sound cruel, but there’s a good reason for choosing your retirement over your kid’s college. You see, there are a number of financing options available for college. But no one is going to finance your retirement. It’s all up to you.

If you’re already age 50 or older, take advantage of Uncle Sam’s help when playing catch-up:

If you have a 401(k) plan at work, save the maximum allowed by the IRS. For 2015, that limit is $18,000 with another $6,000 allowed in catch-up contributions. Also, many employers will match your contributions, at least partially. Don’t turn down the free money they’re willing to give you!

For people with traditional and Roth IRAs, the limit this year is $5,500 with another $1,000 allowed for those over 50.

But even if you’re only 40, start saving and investing NOW. If you could invest about $1,500 a month at a 6% annualized return, you’d be a millionaire at retirement.

Planning Is Key

Most people won’t reach that lofty goal. But there are ways to maximize the return on the money you do have.

First of all, set up a financial plan. You can do this yourself, but using an advisor will help keep you in line when you want to go on that trip to Disney.

Start with an emergency fund set aside in a savings account. It should cover about six months’ worth of household expenses.

Next, invest in the stock market. Its long-term track record is undeniable. Remember that you’ll have 20 to 30 years before you retire. That’s plenty of time for the ups and downs of the market to be smoothed out.

A very rough rule of thumb is that your stock allocation should be 110 minus your age. The remaining percentage should be diversified into other assets: bonds, real estate, gold, etc.

There are also some things to avoid when investing.

The most common mistake I found clients making was putting their investments on auto-pilot with an overuse of index funds and robo-advisors.

Do NOT use a cookie-cutter approach with investing.

The bottom line for middle-aged people is this: The responsibility for your retirement is yours alone, but it’s not too late.Every person and family is unique and each has very needs and goals. Not to mention different definitions of risk. So each financial plan will be different.

There’s still time to save and invest to achieve a comfortable retirement.

But if you don’t act now, you may find that Yogi Berra was right: “The future ain’t what it used to be.”

Good investing,

Tim Maverick

Tim Maverick boasts decades of experience in the investment world. He spent 20 years at a major brokerage firm - as a trading supervisor and broker working directly with clients. Learn More >>

Comments (4)

Maybe the people have lost faith in the government.
It’s runaway deficit spending the constant decline of the value of the dollar. Maybe they think the sacrifice isn’t worth it if their money is valueless at the time they retire!

Thanks for your comment. The dollar’s decline is one reason why people should invest for retirement. You need to try to outpace the long-term ravages of inflation/weak dollar. Also if you diversify properly – you will have assets in other countries and also in the anti-dollar, gold.

Since when did this word “retirement” actually come into being? Only in the last 80 years or so, and primarily due to the existence of large corporations. You were unfit to work after 65 so you should get some stipend to help you survive. BAH! There is not a retirement concept anymore. Just as humanity has done since the dawn of time we will work until we die. Period. “Retire”? Just a broken meme that the investment sector has foisted upon humanity.

Thanks for your comment. Retirement came into being as a way a civilized society can reward those people in their old age who led productive and industrious lives and can now enjoy the fruits of their labors. While I agree there are some unscrupulous people in the investment business, most people are in it to help others achieve their financial goals. You make the most money when your clients make money and then recommend you by word of mouth to others. It’s a win-win.

Donald Trump ran a campaign on hyperbole and vagueness. Now as he prepares to take office, we take a closer look at his contradictory statements on science to make sense of the future of our favored industries.

It’s easy to dismiss celebrities and politicians as having hidden agendas. On the other hand, scientists that uncover cold, hard facts, deserve our respect for their endeavors. But respect is not worship.